Stocks in Europe fell to an almost four-month low as speculation intensified that Britain will vote to leave the EU and traders awaited the outcome of the US Federal Reserve’s policy meeting this week.
The Iseq share index fell below the key psychological 6,000-point level in late trading for the first time since global markets were last gripped by panic, in the middle of February.
The Irish benchmark closed down 1.8 per cent to 5,977.2, marking the Irish market’s sixth straight day of decline and traders warned that volatility is likely to continue into the pivotal UK vote next week.
Financials were among the worst performers, with Bank of Ireland and Permanent TSB, each falling more than 5 per cent.
The Central Bank said Brexit could have a "material" impact on the profitability of Irish financial firms. Bank of Ireland has more than 40 per cent of its loan book in the UK, while Permanent TSB is currently struggling to sell its UK mortgage portfolio to comply with an EU state-aid restructuring plan.
Smurfit Kappa was also out of sorts, falling 4 per cent to €21.50, as broker Kepler Cheuvreux downgraded the company to reduce from hold in a cautious note on the European sector. It said that the prospect of new paper packaging capacity being introduced in Europe could result in the industry being dogged by an all-too-familiar problem of oversupply in the medium term.
The FTSE 100 index closed down 2 per cent at 5,923.53 points, its lowest level in nearly four months. The index also fell below the 6,000 point mark for the first time since February.
A poll from TNS yesterday said the campaign for Brexit had a "significant lead" over supporters of remaining in the bloc, while Britain's biggest selling daily newspaper, the Sun, also urged its readers yesterday to vote to leave the EU.
"There is little enthusiasm to buy UK stocks before the referendum," said London Capital Group analyst Ipek Ozkardeskaya.
Economists have warned that leaving the EU would hit the British economy. That possibility has hit sterling in recent months and the FTSE has now started to track the general weakness in the pound.
Barclays was under pressure after a report from analysts at Jefferies suggested it was the UK bank that would be hit hardest by a vote to leave the EU, sending shares down more than 3 per cent. Lloyds Banking Group also declined.
After climbing 16 per cent from a February low to an April 20 high, the Stoxx 600 has struggled to maintain momentum amid lackluster earnings, skepticism over the European Central Bank’s stimulus program and, most recently, heightened concerns about the UK’s continued membership of the EU.
Among shares active on corporate news, GAM Holding tumbled 18 per cent after the Swiss asset manager said first-half profit will probably halve as performance fees dry up.
Novo Nordisk fell 5.6 per cent after its diabetes drug showed a smaller benefit than analysts had expected in reducing the risk of heart attacks, strokes and deaths from cardiovascular diseases.
Premier Farnell soared 50 per cent after Switzerland's Daetwyler Holding AG agreed to buy the electronic-component distributor for an enterprise value of £792 million
Financial stocks weighed on Wall Street in mid-afternoon trade ahead of the Federal Reserve’s policy meeting as traders see very slim chances of a rate hike in the near term.
JPMorgan fell 1.5 perc ent while Citigroup was off 2.3 per cent. Both were among top losers on the S&P.
One bright spot was the 0.5 per cent rise in US retail sales in May, compared with a 0.3 per cent rise analysts had expected. – (Additional reporting, Bloomberg, Reuters.)